Blog : A Golidlocks Jobs Report

by Ed Zwirn on May 6th, 2013

The market for everything from penny stocks to blue chips scored a resounding performance last week, with the Dow Jones Industrial Average breaking above 15,000 on Friday and closing at a record 14,973.96, up nearly 1.8% from the prior week's 14,712.55 and up 14.3% so far this year.

Propelling the market to a 142-point gain on its final session Friday was a morning report showing steady, albeit anemic, progress on the jobs front. While the consensus had called for an April non-farm payroll rise of 150,000 , following March's disastrous 88,000, not only did the April figure come in at 165,000 (which would have been higher if not for government layoffs), but the March figure was upwardly revised to 138,000. February was also upwardly revised, from 268,000 to 332,000 jobs gained, and the overall unemployment rate, which had been expected to remain steady, actually fell a tad, to 7.5%, its lowest level in four years.

Most of the other economic news that hit our penny stock radar this past week was disappointing. On Monday, it was announced that personal income rose by a less-than-expected 0.3% in March, following a February 1.1% increase. Personal spending rose by a better-than-expected 0.2%, following a February rise of 0.7%.

Construction spending tanked in March, falling by 1.7%, much worse than the 0.4% increase consensus, following a 1.2% increase the prior month. April auto sales were off slightly at 5.1 million, versus March's 5.3 million. April truck sales weighed in at 6.8 million, up from 6.7 million.

March factory orders were also a disaster for penny stocks and their more expensive cohorts, with that key indicator falling 4%, much worse than the consensus, which had called for a 2.5% fall, and following an adjusted February increase of 1.9%.

The upshot of all this for penny stocks is that, despite significant headwinds from overseas, the domestic U.S. economy is plodding along at a rate just quick enough to generate some optimism but at the same time much too slow to trigger any tightening by the Fed. As long as all the numbers keep coming in well below the inflation and unemployment numbers specified in Wednesday's FOMC release, the central bank has promised to continue printing money, and may even up the ante, and this is a significant bullish indicator for penny stocks and for anybody deciding which stocks to buy.

Looking ahead, penny stock investors can expect rumor and non-economic news to dominate the headlines this week in the absence of blockbuster economic figures. Economic news events nevertheless worthy of a penny stock picker's attention include:

* Tuesday's consumer credit report, which is expected to weigh in at $16.3 billion for March, down from February's $18.1 billion.

* On Thursday, the consensus calls for a 0.3% rise in wholesale inventories for March, following a 0.3% drop in February.